What is in the India - UK trade deal?

7 May 2025, 12:46 | Updated: 8 May 2025, 15:30

The Government has fended off criticism for its newly signed trade deal with India, stating the agreement can boost the British economy by £4.8bn a year.

Sir Keir Starmer and Indian counterpart Narendra Modi announced an agreement on Tuesday which will see tariffs cut.

The UK prime minister approved the plan which has been three years in the making and has been seen as one of the biggest boosts to the British economy since Brexit.

However, conditions of the deal that will see some workers exempt from paying national insurance in the UK for three years have been slammed by the PM’s opposition.

Read more: Minister locks horns with Nigel Farage over claims UK-India trade deal 'discriminates' against British workers

Tory shadow minister Robert Jenrick has claimed that this is proof that "British workers come last" under Labour, while Lib Dem leader Ed Davey has called the agreement “half baked”.

On the phone lines, LBC listeners were at loggerheads over whether the deal was good news for the UK.

It all comes in the weeks after Donald Trump announced trade tariffs were to be placed on nations around the world - leaving countries keen to strike deals.

Here is what the deal means.

What is in the trade deal signed between India and the UK?

The deal at a glance

• British and Indian prime ministers Sir Keir Starmer and Narendra Modi struck a deal on Tuesday which will see lower tax rates on imports between the two countries.
• The long-planned deal is one of the biggest signed since Brexit and has been hailed by the government as having the potential to add £4.8bn to the economy within 15 years.
• However, elements of the fineprint have sparked controversy - such as the exemption for Indians paying national insurance for three years.
• The deal is set to come into effect next year - but will first need to be ratified by Parliament. Sir Keir is likely to meet Mr Modi later in 2025 to shake hands on the agreement.

What goods are part of the deal?

The UK has lowered taxes on goods imported from India, including clothing and footwear, food products such as frozen prawns, jewellery and gems, and certain cars, reports the BBC.

Meanwhile, India has cut taxes on goods imported from the UK, including cosmetics, scotch whisky, gin and soft drinks, higher-value cars, various food items such as lamb, salmon, chocolate and biscuits, medical devices, and aerospace products.

Why have they needed to do this now?

The announcement has followed on from Donald Trump imposing tariffs on countries around the world.

The deal has been on the cards since Brexit, but countries have been eager to finalise deals on the back of the US president’s “liberation day” announcements.

According to the Guardian, it will boost British-Indian trade by £25.5bn per year but crucially it is going to help trade in areas that have been impacted by the loss of the US exports.

The decline of the car trade between the US and UK is one area that the Indian deal could look to compensate for, the Independent has reported.

What have Sir Keir Starmer and Narendra Modi said?

The leaders have not yet shaken hands on the agreement and it is still needed to be ratified and signed off in Parliament.

“The trade deal with India will raise living standards, put more money in the pockets of British working people, and deepen the unique ties between our two nations,” Sir Keir tweeted.

Mr Modi added: “Delighted to speak with my friend PM @Keir_Starmer.

“In a historic milestone, India and the UK have successfully concluded an ambitious and mutually beneficial Free Trade Agreement, along with a Double Contribution Convention.

“These landmark agreements will further deepen our comprehensive strategic partnership, and catalyse trade, investment, growth, job creation, and innovation in both our economies. I look forward to welcoming PM Starmer to India soon.”

What has been the opposition to it?

Opposition has been brewing since the announcement on Tuesday and then thoroughly debated in parliament at Prime Minister’s Questions today.

Central to the detraction has been the aspect of that deal that will see some Indian workers exempt from paying national insurance in the UK for three years.

Robert Jenrick, the Conservative shadow minister, claimed that "British workers come last", while his stablemate shadow business minister Dame Harriett Baldwin said the deal would be "subsidising Indian labour while undercutting British workers".

Lib Dem leader Sir Ed Davey also criticised the agreement, saying that plans on national insurance included in the deal were "half-baked" and that he would vote against it.

Nigel Farage told LBC’s Nick Ferrari that it “discriminates against British workers”.

The Reform leader added: "We are discriminating against British workers through the tax system, a two tier tax system for big employers and for individual employees. It is scandalous beyond belief.

"The bloke running your local pub has just had a massive tax hike for all the staff that work for it."

Jonathan Reynolds hit back on LBC to say the claims the deal is unfair were "absolute nonsense". Labour’s business secretary told Nick “it’s a smasher of a deal”.

"It's worth around five billion pounds this year and every year over time it means higher wages, it means more jobs, it of course means more exports."